Incident: The company released its annual report for the year 23, and 23fy achieved revenue/ net profit of 6.8/0.18/0.24 billion yuan, yoy+9.3/ -37.6%/-14.5%, 24Q1 single quarter revenue/ net profit of 1.7/017 billion yuan, yoy +17.7%/+51%. The decline in 23fy's net profit is mainly due to the decline in some goodwill and profitability of specialty additives.

The fiber industry is growing rapidly. The specialty additives business is clearly affected by downstream business. The revenue of products related to the paint industry was 490 million yuan, accounting for 72% of the company's revenue, up 6.88% year on year; corresponding gross profit margin was 29.8%, up 1.67 pct year on year. The revenue of products related to the textile industry was 157 million yuan, accounting for 23% of the company's revenue (18.4% in '22), up 36.36% year on year; corresponding gross profit margin of 13.4%, up 0.36 pct year on year.

Furthermore, due to the decline in demand from end customers in the container industry and photovoltaic industry, sales of Kaimen Additives specialty additives products have declined drastically, which has had a great impact on sales of products such as Kaimen Additives.

New products are being released intensively, and the company's size is expected to increase

Currently, the main application scenarios for electronic hydrocarbon resins and SMA resins in the company's layout are basic materials for PCBs, in the field of CCL high-frequency high-speed copper-clad plates; the electronic grade UV monomers and photosensitive resins are all upstream of the PCB industry, and the main application scenarios are PCB dry film photoresists. Among them, electronic grade hydrocarbon resins are mainly used in the M6 to M8 series of 5G high-speed copper-clad plate products.

Photoresist nanopigment dispersion: A color filter used in liquid crystal displays, which is the core material for color display. The company has completed multiple batch sample delivery verification of some photoresist color paste samples and obtained verification reports from downstream core customers. Currently, the “Special Resin and Special Additive Technology Transformation Project for High-frequency Copper Clad Plates with an annual output of 10,000 tons” is in the trial production stage.

New energy layout: Relying on decentralized technology, the company invested in the construction of a demonstration production line project with an annual output of 30 MWh zinc-nickel batteries, which is mainly used in scenarios with high safety requirements and a wide operating temperature range. The company reached a strategic cooperation with Huasheng New Energy to jointly develop the photovoltaic and energy storage business in the future.

Continue to be optimistic about the company's medium- to long-term growth and maintain a “buy” rating

Investment advice: The company is expected to enter a year of capacity implementation and performance contribution in 24-25, and there have been breakthroughs in domestic substitution for some products. We expect the company's net profit to be 190 million yuan, 350 million yuan, and 4.9 billion yuan respectively in 24-26, maintaining a “buy” rating.

Risk warning: risk of fluctuations in raw material prices, management risks due to scale expansion, risk of proposed changes in control, fund-raising projects falling short of expectations